Income Taxes

6 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 13. Income Taxes

The components of income before income taxes are as follows (dollars in thousands):

	Three Months Ended March 31,					Six Months Ended March 31,
	2022			2021		2022		2021
Domestic	$	(3,009	)	$	10,930	$	14,199	$	14,244
Foreign		5,978			6,449		8,113		14,661
Income before income taxes	$	2,969		$	17,379	$	22,312	$	28,905

The components of the provision for (benefit from) income taxes are as follows (dollars in thousands):

	Three Months Ended March 31,						Six Months Ended March 31,
	2022			2021			2022			2021
Domestic	$	233		$	4,191		$	1,670		$	3,753
Foreign		3,212			2,025			2,074			(6,952	)
Provision for (benefit from) income taxes	$	3,445		$	6,216		$	3,744		$	(3,199	)
Effective income tax rate		116.0	%		35.8	%		16.8	%		(11.1	)%

The effective tax rates for the periods presented are based upon estimated income for the fiscal year and the statutory tax rates enacted in the jurisdictions in which we operate. For all periods presented, the effective tax rate differs from the 21.0% statutory U.S. tax rate due to the impact of the nondeductible stock-based compensation and our mix of jurisdictional earnings and related differences in foreign statutory tax rates.

Our effective tax rate for the three months ended March 31, 2022 was 116.0% compared to 35.8% for the three months ended March 31, 2021. Consequently, our provision for income taxes for the three months ended March 31, 2022 was $3.4 million, a net decrease of $2.8 million from a provision for income taxes of $6.2 million for the three months ended March 31, 2021. This difference was attributable to our composition of jurisdiction earnings and U.S. inclusions of foreign taxable income as a result of 2017 tax law changes. 

Our effective tax rate for the six months ended March 31, 2022 was 16.8% compared to negative 11.1% for the six months ended March 31, 2021. Consequently, our provision for income taxes for the six months ended March 31, 2022 was $3.7 million, a net increase of $6.9 million from a benefit from income taxes of $3.2 million for the six months ended March 31, 2021. This difference was attributable to our composition of jurisdiction earnings, U.S. inclusions of foreign taxable income as a result of 2017 tax law changes, and a $15.8 million tax benefit recorded as a result of an increase to the enacted Netherlands tax rate in the first quarter of fiscal 2021 partially offset by a $3.5 million tax benefit recorded as result of an increase to the enacted Netherlands tax rate in the first quarter of fiscal 2022.

Deferred tax assets and liabilities are measured using the statutory tax rates and laws expected to apply to taxable income in the years in which the temporary differences are expected to reverse. Valuation allowances are provided against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and the timing of the temporary differences becoming deductible. Management considers, among other available information, scheduled reversals of deferred tax liabilities, projected future taxable income, limitations of availability of net operating loss carryforwards, and other matters in making this assessment.